How do you value a business??

[laptopsteve]

How do you value a business?? is it based on value of net profit or turnover including profit? and if anything else such as premises or do you not include premises?

[tamborine]

Gross annual income, stock & fittings value. Freehold/rent listed separately.

[buildersmate]

I see - Gross annual income = �3m pa. Costs of employing staff = �2.99m pa. Other costs as listed.
That �3m then makes it is massively valuable business does it Tamborine?

[Skyline D]

There are two normal ways of valuing a business.

One is to take a multiple of the bottom line net profits. Usually somewhere between 5 and 10 times. So if the business makes �100k per annum it's probably worth somewhere between �0.5m and �1m. This is the more usual way of valuing a trading business.

The other way is simply to add up the value of its assets and liabilities. In effect the Net Asset Value as shown by its balance sheet. Therefore value of property, vehicles, plant, stocks, debtor book, bank balances, less any loans, overdrafts, creditors, etc. You may also add an element for goodwill though that's a figure just plucked from the sky really. The Net Assets basis is more likely to be used to value a business in trouble or loss making.

The truth is possibly somewhere in between all of that.

[tamborine]

How 'for sale' business are presented, googled:

http://www.punchpubs.co.uk/Punch/Punch+Pubs/Hi dden/Refurbishment2/

[Markandshez]

Back in the day, I remember it as being between 3 and 5 times the net profit of the business (assuming the accounts are correct- which they never will be for the smaller businesses for many reasons)

Nowadays it is worth what someone is willing to pay for it. Simple as that